Investing

As Bitcoin Slides, MicroStrategy Buys Even More

Rich Duprey

Published: January 14, 2025 2:13 pm

Bitcoin (CRYPTO:BTC) prices briefly dipped below $90,000 early on Monday, its lowest level in two months, as the likelihood of further cuts in interest rates by the Federal Reserve in 2025 roiled assets everywhere. But the cryptocurrency quickly reversed course and now sits just under $96,000.

Concerns about the impact global and macroeconomic events will have on Bitcoin have not deterred MicroStrategy (NASDAQ:MSTR) from buying even more of the crypto. In its latest update, the Bitcoin Treasury Company reported it bought 2,530 bitcoin for $243 million at an average price of $95,972 each. 

That brings MicroStrategy’s total holdings to 450,000 bitcoin with an average purchase price of $62,691. It marks the 10th consecutive week CEO Michael Saylor bought bitcoin, but shows he is getting less bang for his buck while raising his total costs. 

24/7 Wall St. Insights:

• MicroStrategy (MSTR) CEO Michael Saylor continues buying up Bitcoin (BTC), increasing his crypto holdings to 450,000 bitcoin.
• The average cost of his purchases has soared 47% since he began buying weekly even though Bitcoin’s price has only risen 28%.
• Increased market and economic turmoil raises the riskiness of MicroStrategy’s stock.
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An increasingly risky proposition

While the average price MicroStrategy paid for each bitcoin rose 28% over the 10-week period, the average purchase price of its bitcoin holdings has jumped 47%.

^{Source:MicroStrategy SEC 8-K filings.}

As the possibility of a Bitcoin crash grows, MicroStrategy increases the likelihood of severely damaging its financial position due to the downside risk being amplified.

It’s a risk-off moment for MicroStrategy

The stronger-than-expected jobs report showing the U.S. added 256,000 positions increased the probability the Fed won’t cut rates anymore this year. Inflation is ramping up once more, with core rates rising from 2.6% to 3.3%, meaning it’s possible the Fed could actually raise rates again.

With the so-called “Fed pivot” to lower rates over, investors will move to de-risk their portfolios. We’re already see it happening as the price of gold has risen 32% over the past year. In periods of lower interest rates, investors move towards risk-on assets like Bitcoin to seek out higher returns. The opposite occurs when rates rise. The choppiness we’re seeing now with Bitcoin and its price fluctuating wildly, could be signalling a sharp correction is just over the horizon.

Key takeaways

MicroStrategy stock is up 13% year-to-date, but has lost 40% of its value since its November high when it began its current weekly acquisition strategy. In contrast, Bitcoin is down only 11% from its high.

After announcing plans to decimate shareholders with a massively dilutive share increase while also boosting its ability to equally increase its debt, buying MSTR stock has itself become more risky.

Saylor just urged other companies to buy Bitcoin, calling bonds “toxic.” He suggested they should no longer “cling to the past” of buying Treasuries, buying back stock, and paying dividends. Instead they should “embrace the future” of digital capital like Bitcoin.

There is a certain self-serving nature to his pitch, as more buyers would boost the crypto’s price and allow him to keep all the balls he’s juggling up in the air. If the balls start to fall, MicroStrategy’s strategy will crash, along with its stock.